Day Trading Futures

An Incredible day for traders day trading futures, specifically Euro Currency Futures. This market rallied over 150 ticks in less then 1 hour and in one five minute bar had a range of 55 ticks. This is a great example of why short-term traders should utilize stops when day trading futures..

This is one of those days where a day trader gets into a position, forgets to utilize a stop, or just isn't trading with a stop and get's caught. The question now is what to do? How many traders (inclucing myself) have tried to fight back by scaling in looking for a retracement? Well, even if that works it's never the right decision. Or how many traders have gotten caught and then turn a short-term trade into a position trade?

Learning to step out of the market on a day like today (see chart below) in my opinion is a good habit for day traders to practice, particularly those traders with smaller accounts or not alot of experience day trading futures.



Remember, trading is like war, therefore it's not going to be won in one battle. So, pick your spots and if the battle gets to heavy you can always retreat to fight another day.

There is significant risk in trading futures, therefore you should carefully consider whether such an investment is right for you in light of your financial position.

 

Day trading futures requires traders not only to be cognizant of highs and lows, but of volume also. The idea of volume for me is to understand where traders are actually buying and selling markets. For example let’s take a look at the March 2010 Euro Currency Futures contract (below).



Notice that the above today’s strip of concentrated volume (green rectangle) there wasn’t much volume above that area. When I see technical structure like this I want to be cautious of fading rallies because in my technical opinion there isn’t much in the way of resistance. The same holds true if a currency futures trader is trying to buy a falling market in an area of shallow volume.

Once again, trading is like war and most wars are made up of multiple battles, so don’t think you have to win every battle to win the war.

There is significant risk of loss in trading futures, therefore you should carefully consider whether such an investment is right for you in light of your financial position.

 

Currency Traders day trading futures that are specially short-term trading (not be mistaken with intra-day swing trading) must remember not to change their short-term objectives or risk parameters into longer time frames. It’s my experience that short-term traders do this when they get caught in an adverse move without a stop or not exiting a short-term position based on their own short-term rules.

You can see by looking at today’s (Tuesday Feb. 23, 2010) 5-minute chart of the March 2010 Euro Currency Futures contract 9(see chart below) that today is a perfect set-up on how a short-term trader could get caught. The market pops from an early low (1.3530), from which a short-term trader jumps in looking at whatever trade trigger. The market then pulls back and instead of taking short-term profits a short-term traders doubles up or stays in thinking the initial pop was the real deal.



How can day traders avoid this short-term trading mistake? Remember, your initial objectives, which means don’t get greedy and stick to your exit rules whether that means don’t forget your stops, or get out when your rules tell you to get out.

Opinions expressed are subject to change without notice. I make no promises or guarantees implied or otherwise that utilizing short-term trading strategies will result in profits or limited losses. There is significant risk of financial loss in trading futures; therefore you should carefully consider whether trading futures is right for you in light of your financial condition.